AAAE - Facing the Financial Music

by John F. Infanger and Jodi Richards On Jun 12, 2006

SAN DIEGO — FAA Administrator Marion Blakey and her top airport official, interim airport division head Kate Lang, set the tone at this year’s annual AAAE convention, calling for industry to closely examine how the system is funded, and how that money is spent. Says Lang, question everything. At the same time, in an uncertain airline world, a renewed focus on planning is occurring among those who direct U.S. airports.

The goal from the FAA’s perspective, says Administrator Blakey, is a “robust” Airport Improvement Program; that said, the Administration is still pushing for cuts of more than $700 million in the AIP appropriation — at $2.75 billion — for FY2007, which begins October 1. According to Blakey, the agency expects to be able to “support” most important AIP projects, though at the expense of entitlements, which will be cut in half, and the loss of general aviation airport entitlements, a concern for many in attendance here.

Blakey says that the Administration’s proposed cuts do not reflect the importance it puts on improving airport infrastructure; rather, it is a reality of challenging budgetary times in Washington.

The central theme of Blakey’s speech here, as it has been for some time, is the Administrator’s call for a new formula for funding the system — AIP, the FAA, and air traffic control. The agency’s costs continue to rise, says Blakey, at a time when, she maintains, the formula for funding the Aviation Trust Fund is proving inadequate.

The agency has developed a new funding formula which it has forwarded to the Office of Management and Budget for review. Blakey was uncertain as to when the plan will be released for comment. However, many in industry say they anticipate that FAA’s proposal will look similar to one released in March by the Air Transport Association. ATA’s proposal is more time-in-system based and seeks to garner more dollars from the business aviation segment, while placing an emphasis on modernizing the ATC system.

Deputy Administrator Lang, meanwhile, challenges industry to make specific recommendations on how money FAA has should be spent, and to identify which programs should take priority.

Questions with New Jets

More questions than answers were raised during a session discussing the impact of very light jets. Edward Faberman, partner with Wiley, Rein & Fielding, says the exact number of VLJs that will be flying is not as critical as the fact that “we need a system that can handle it,” because the aircraft will put some pressure on air traffic control, already sorely in need of updates.

Faberman says that the Depart-ment of Homeland Security is very interested in the VLJ — it’s expected the aircraft will go into smaller airports that might not have the “necessary security.” He predicts that in time Transportation Security Administration officials will be found at each airport. Dennis Rouleau, manager of Chicago’s Palwaukee Municipal Airport, cautions that the industry may see the 12,500-lb. security rule reduced to 10,000 pounds.

While people using these aircraft are going to want to utilize the closest airport to their destination, Faberman says some will be willing to go to secondary airports because of the cost of operating at larger ones. Rouleau agrees that price and convenience will both be factors that play into a VLJ operator’s decision of which airport to use.

Other questions and concerns raised by attendees during the session include:

How will the air taxi business model work? Payload on these aircraft is minimal.

How does a pilot get trained to fly the VLJ? Who will insure them?

‘Remain overnight’ facilities will need to be planned for smaller airports for charter operations; there will need to be two pilots.

Will the charter companies that use VLJs be profitable? How long that takes could dictate how quickly facilities need to be built.

VLJs have been marketed for their low cost of operation — how will rising fuel prices affect this?

Registered Traveler Pilot

TSA’s Ted Sobel says the agency does not see the Registered Traveler Program as a government program. “We see us as providing security, but the private sector filling the need.”

According to Sobel, TSA sees the role of the airports in a registered traveler program as partners in development and procurement; partners in compliance with standards of the program; and, as a source for new ideas.

He identifies three parameters in the establishment of a registered traveler program: it must maintain a certain level of security; there can be no incremental cost to TSA; and, it should not put non-registered traveler airports at a disadvantage.

Over the next few months, he says, TSA will select 10-20 airports to participate in a pilot for a registered traveler type-program — the new pilot RT-20. “We expect these pilots to morph into a national program,” he says. Meanwhile, TSA is working in parallel to set up a rule for the program. The goal of the rule, he says, will be to ensure the most public participation.

The application process to participate in the RT-20 program had not been written at the time of Sobel’s presentation. TSA is working with security operations within the agency to get it written and out to airports. Sobel expects that airports for the pilot will be approved and announced on a “rolling basis,” he explains. “Expect to see the selection done in groups — but again, nothing has been finalized. That’s just my expectation.” Sobel can be contacted at ted.sobel@tsa.gov.

One on One: Incoming AAAE Chair Elaine Roberts

SAN DIEGO — Elaine Roberts, incoming AAAE chair, sat with AIRPORT BUSINESS during the annual airport meeting here to discuss industry issues. Roberts, President/CEO of the Columbus (OH) Regional Airport Authority, operates in an environment that is a microcosm of the industry — be it airline service, planning and development, or general aviation.

Roberts oversees Port Columbus International and Rickenbacker International, a converted military base, and Bolton Field. She is past president of the Rhode Island Airport Corporation and served previously at Indianapolis International Airport. Following are edited excerpts of her recent interview ...

On an initiative underway with Norfolk Southern to create an intermodal freight facility at Rickenbacker...

“This has been a real learning experience for me. The intermodal business is the fastest growing segment for railroads today in this country; it’s surpassed coal and other types of freight. It’s double-digit growth, at least for Norfolk Southern.

“For the past three years, we’ve worked heavily with them to get federal funding out of the highway bill to build this $65 million facility. Construction will start this summer and conclude next year.”

On results of a trip by Columbus officials to tour Alliance Airport north of Ft. Worth...

“We took about two dozen community leaders, from both state and local government, and the airport. They built Alliance Airport thinking that that was going to be the stimulus for all this economic development. They were surprised to find out that it was the intermodal facility built by Burlington Northern/Santa Fe railroad that really triggered a lot of companies wanting to build their distribution centers there. FedEx is a big asset, but it was the rail facility that led to the success of Alliance.

“We have a lot of the same assets already at Rickenbacker. We have the airport with two 12,000-foot runways; highway access; and over 25 million square feet of space already in the Rickenbacker area.

“That visit was critical for us two years ago to get people to see what it could do for job creation. We’re working with the Port of Virginia in Norfolk as well and with the railroad on joint marketing. As they work on the seaport side, we’re going to be the link inland on rail and truck to get goods brought in from the East Coast.”

On proposed cuts for FY07 by the Administration for the Airport Improvement Program...

“People are not happy, as you can imagine. Part of my job as chair is to encourage members to be very active in the debate. Congress has some tough choices. At the same time, airports are economic engines; you need to be putting money into infrastructure that will generate jobs. To not invest in airports would be a short-sighted mistake.

“I think what we’d like to do is, get through the appropriations process this year and try to recover a lot of the AIP dollars [for FY07]. From a strategy standpoint, we need to see where everybody else is going to line up before we just throw out one set position. Timing will be a lot of it. Hearings won’t start [for the FY08 reauthorization bill] before later this year, at the earliest. You don’t want to peak too early. I just hope we can get the reauthorization done before the current one expires. I’d hate to see us return to continuing resolutions.”

On airports getting into other airline services...

“We own nearly all the jet bridges; the airlines were leasing the bridges from us, and they were responsible for the maintenance. What we were finding is, frequently they weren’t doing the preventative maintenance, and they were waiting until the bridge broke and they needed a repair service. Then it became a customer service issue. And they need it fixed right away, which costs more. We did an analysis and decided to do it internally, and that we’d hire a couple of more people if we had enough interest from the carriers.

“We charge $100/month per bridge to do PM and to be on-call and having some parts in stock.

“I think we’re seeing a lot of airlines, especially in communities where they only have a few flights a day, looking for the most cost-effective way of getting these services done without having their own staff at all these airports.

“Saturday at our Board meeting the Airline Economics Air Service Committee proposed a ground handling group that would be set up like the Contract Tower Association. There apparently are a lot of airports that are getting interested in this, particularly smaller airports where they can also use that as a way to attract air service.”

On airline service, having seen America West build and dismantle a hub facility at Port Columbus...

“There is so much change and transition with airline property folks, you sometimes won’t even be dealing with the same people two or three years in a row.

“We revisited our entire master plan. We had plans for a future terminal; we were on a fast growth pace with America West and other pre-9/11 growth that was going to require us to be building a new terminal building by 2010 at the latest. Now it looks more like 2018.

“If it takes an incentive to get the airline to try the market, we believe the service will be successful. Our incentive is primarily a waiver of fees for the first year, landing fees and in some cases terminal rent, because we know the startup costs are higher. These are fees we wouldn’t have had anyway if they weren’t there. We also help promote the service.”